Analysis of Retail Investors Attitude towards IPO Investments with Special Reference to Coimbatore City

Abstract

The investment behavior of retail investors in Initial Public Offerings (IPOs) plays a crucial role in capital markets, influencing both market stability and company valuations. This study aims to explore the attitudes and perceptions of retail investors towards IPO investments, focusing on key factors such as risk tolerance, financial literacy, past investment experiences, and external market influences. Through a combination of primary data collection and secondary research, this study examines the motivations, expectations, and challenges faced by retail investors when participating in IPOs. The research identifies critical behavioral patterns, including the influence of herd mentality, market sentiment, and regulatory policies on investment decisions. The findings suggest that while IPOs are perceived as attractive investment opportunities, concerns over risk, information asymmetry, and post-listing performance impact investor confidence. The study emphasizes the need for enhanced investor awareness, financial education, and transparent regulatory frameworks to foster informed investment decisions.

Introduction

Introduction to IPOs

An Initial Public Offering (IPO) is the first time a company offers its shares to the public. It allows businesses to raise capital for expansion, reduce debt, or boost visibility. IPOs offer potentially high returns, attracting both retail and institutional investors. However, they carry significant risks, including speculative valuations and market volatility.

2. Statement of Problem

While IPOs are increasingly popular among retail investors, many struggle due to limited access to information and financial literacy. Despite the potential for high returns, there’s often insufficient understanding of the risks and psychological or behavioral factors that influence decision-making. The study aims to explore attitudes and factors affecting retail investor decisions on IPOs.

3. Objectives of the Study

1. Assess retail investors’ awareness and understanding of IPOs.

2. Identify key factors influencing their IPO investment decisions.

4. Scope & Limitations

• Focus is on retail investors in Coimbatore who have participated in IPOs in the past 5 years.

• Covers 150 respondents, making it limited in size and geography.

• The results may not apply to other regions or longer periods.

5. Literature Review Highlights

• Regulation and Transparency increase retail investor confidence (Chen & Lee, 2024).

• Key influences include company reputation, past performance, and management (Arora et al., 2024).

• Post-IPO performance affects future investment behavior (Lee & Tan, 2023).

• Retail investors often rely on past trends rather than company fundamentals (Sharma & Kumar, 2023).

• Mobile trading apps have increased access but reduced due diligence (Yadav & Joshi, 2022).

6. Data Analysis & Interpretation

Demographics:

• Most investors are aged 26–35 (28.7%) and male (55.3%).

• Majority earn above ?50,000 monthly and are postgraduates.

Sources of IPO Information:

• 22% rely on financial apps, followed by news media (18%) and brokerage firms (16.7%).

Key Factors Before Investing:

• Risk factors (17.3%) are the most important consideration.

• Followed by company’s past performance (15.3%) and market trends (13.3%).

IPO Awareness Levels (Mean Scores):

• Highest awareness is from mobile apps (3.42).

• Followed by subscription rate (3.4) and risk factors (3.39).

7. Hypothesis Testing

• Age group significantly affects awareness of IPO subscription rates (Chi-square value = 21.854; p = 0.039).

• A second hypothesis (on gender and satisfaction with social media updates) is introduced but results are not provided.

Conclusion

The study on retail investors\' attitudes toward IPO investments provides valuable insights into the factors influencing investment behavior, awareness levels, and satisfaction with IPO-related aspects. The findings indicate that financial applications are the primary source of IPO information, highlighting the increasing reliance on digital investment tools. Furthermore, risk factors play a crucial role in decision-making, suggesting the need for more investor education on risk mitigation strategies.Investors consider the IPO price band sometimes before making investment decisions, indicating that price transparency can enhance investor confidence. The study also reveals that Return on Investment (ROI) is the most prioritized financial metric, reflecting investors\' focus on profitability. Market volatility emerges as the biggest concern, which suggests that investors seek more stability in IPO offerings.

References

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Copyright

Copyright © 2025 Dr. S. Kowsalya, Ms. S. Sobhika. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.